The real stories from inside the F1 paddock

Notebook from Japan

The following is a summary of stories that were circulating over the weekend in the Suzuka paddock.

The big news in the automotive world, of course, has been the Volkswagen debacle, with the German multinational admitting to US Environmental Protection Agency accusations that it has been deliberately falsifying emissions tests, using clever software that detects when a car is being tested and changes the emissions accordingly. The company has lost around 35 percent of its value on the various stock markets, while the company chairman Martin Winterkorn has been forced to resign. The firm is expecting a massive financial impact, with estimates of around $25 billion in damages and further losses from loss of trust in the brand and damage to the VW reputation. There are also likely to be criminal charges against those who perpetrated the fraudulent behaviour. VW has already filed a complaint with German prosecutors against unnamed employees. The changing of the guard in Volkswagen could, perhaps, bring in new executives who are excited about F1, but it must also be said that two of the biggest motorsport fans in the company – Ulrich Hackenberg and Wolfgang Hatz – are both expected to be out. It is impossible to say what the long-term impact will be, but it is likely that all of this will change the motorsport strategies of the company, but no-one knows what those changes will be. It might even be good news for the sport because a high profile hybrid programme might be deemed the best way to rebuild the company’s environmental image. Having said that motorsport is not going to be a priority at a time when the knives are still flying. The company has a string of different brands, notably VW, Audi, Porsche, SEAT, Skoda, Bentley, Lamborghini and Bugatti. In addition, there are other dormant brands that might be used if really radical change is considered a good idea. These include AutoUnion, Wanderer, Horch and DKW. The timing of the disaster could not be worse for Red Bull, which has apparently been busy trying to get Audi to agree to go into partnership over a Formula 1 engine. The rumours suggested that Red Bull would be willing to pay Audi $80 million dollars a year, while the Ingolstadt firm would shut down its Le Mans programme, which makes little sense these days now that sister brand Porsche is now up to speed in WEC. The departure of Winterkorn may also end the company’s fascination with football, with sponsorship of VfLWolfsburg, Ingolstadt FC and a shareholding in Bundesliga champions Bayern Munich. The firm also has smaller sponsorship deals with more than a dozen other clubs, including Hamburg SV, Schalke 04 and Eintracht Braunschweig.

Red Bull was up the proverbial gum tree prior to the scandal as the company made the daft decision to terminate its Renault supply before it had a new contract in place. That happened in Hungary in July and with Mercedes saying no in the course of the Monza weekend and Honda showing no interest, the only available choice is Ferrari. The Italians are happy to provide Red Bull with two customer engine supplies, but these are going to be expensive and the resulting package is unlikely to be as competitive as the factory Ferrari, because the best packages involve design compromises on both sides, while customer supplies do not. The important question is how this has occurred. Most people think that Red Bull was simply too arrogant, while the conspiracy theorists suggest that the firm was stitched up. Dietrich Mateschitz has been walking in the Austrian woods and has been considering pulling out of F1 but that is unlikely to happen because, in exchange for large sums of extra prize money from the Formula One group, Red Bull agreed to stay in the sport for 10 years (until 2020) and there is believed to be a penalty scheme, which means that the penalty for pulling out reduces from $1 billion by $100 million per year. This means that Red Bull can walk away from the sport if the company is willing to pay the Formula One group $500 million. Given the bill, it is best for Mateschitz to keep his money and make the most of the mess the team is in and try not to screw up so monumentally in the future. The other option to save face would be for Mateschitz to dig even deeper and buy control of Delta Topco, the parent company of the Formula One group. He could then sell his teams without being red in the face. Bernie Ecclestone would probably like that as Matechitz would no doubt keep him on…

The Red Bull mess has been a nice little bonus for Ferrari boss Sergio Marchionne, who disguises a ruthless streak beneath avuncular pullovers. This means that he can insist on expensive long-term deals and that future revenue can be compounded and added to the Ferrari financials, resulting in a higher valuation when the firm goes to the markets. With a revenue multiplier for the IPO in double figures, two $40 million engine deals, each for three years, could add $2.4 billion to the value of Ferrari… The Ferrari racing team personnel may not like the idea of Red Bull getting the engines, but when you look at the kind of numbers involved, one can see that Marchionne is in a position to be “generous”.

There was also a lot of talk in Suzuka about Lotus and Renault. If all goes to plan the French firm will get a 30-day option to buy the team later today. It will then be able to get a financial package in place with most of the debt staying with the old shareholders (ouch!) but money coming in from Red Bull (the fee to cancel the 2016 engine deals), from Pastor Maldonado, from Total and form the Formula One group. The last-named entity was not keen to pay anything (CVC Capital Partners being too busy stripping money out of the sport to care about keeping teams alive). A compromise seems to have been struck that means that Renault will commit to F1 for five years, with small payments in addition to prize money for the first four years (2016, 2017, 2018 and 2019) After that the team would become eligible for much bigger payments if successful, with figures in the region of $80 million per year possible, if the team wins two championships. If this is all written down and signed up it would enable Renault to borrow against futures revenues and so come up with the cash it needs right now to settle all the non-shareholder debts and to invest. Getting rid of all debts and liens on property and equipment etc will cost about $55 million. Strengthening the team will cost more, but with these sources of money put together the team can have a budget of around $250 million next year, without needing the second driver to come with cash. This is a good bet for Kevin Magnussen, although if the French want the team to be more French it could open the way for Jean-Eric Vergne, as Romain Grosjean will be confirmed as a Haas F1 driver tomorrow, along with Esteban Gutierrez. The former shareholders will be left with about 30 percent of the shares and can make money back by either selling the shares or waiting for dividends (or both).

The long-term Renault deal with FOM would be very useful for Ecclestone as this would give him a car manufacturer committed beyond 2020. He would then need only Ferrari and the others would have to follow… Clever stuff. Having said that, Bernie will be 90 years old if he makes it to 2020 and he may find that his pace of life will have to slow down a little.

Bernie has missed the last couple of race this year and if his planned 2016 calendar goes ahead he will probably miss quite a few next year as the stresses and strains of global travel week-in, week-out, is probably not something that doctors recommend for the more mature members of society. The latest draft calendar was circulating (quietly) in Japan with the season kicking off in Australia on March 20, with four stand-alone flyaways to kick off the year: Australia, Bahrain, China and Russia all two weeks apart. This would be followed by Spain and Monaco as usual and then a very odd double-header involving Canada and Azerbaijan. This is apparently possible but would mean that the Baku race would clash with the Le Mans 24 Hours. However, if the race in Azerbaijan were in the evening, Le Mans TV viewers would be able to slip seamlessly into coverage of the new street race… There would then be a busy four races in five weekends in July before a solid August break and then an autumn involving Singapore, followed by a two-week break and then a Malaysia-Japan double-header. Good for the air miles if nothing else. The word is that Austin would be a stand-alone race followed by a Mexico-Brzil double-header, which would get the championship finished before the end of November with 21 races included.

On the driver front, the number of seats available is reducing rapidly with Sergio Perez having grabbed the second Force India. Alexander Rossi is hoping to secure a ride at Manor, as is Will Stevens, but both are wary of Indonesia’s Rio Haryanto who is believed to have a huge pile of cash from the government-owned Pertamina oil company, which is keen to lift its profile in Europe. Haryanto is racing in GP2 with Campos and has won some races. The other name being mentioned at Manor is that of Mercedes protege Pascal Wehrlein, although there is no plan for Mercedes to buy into Manor as has been rumoured in the wilder elements of the F1 press corps. The McLaren’s situation is confused with all manner of contradictory quotes flying about. There is talk of sabbaticals, but these sound rather far-fetched… However, the prize for the least likely story of the weekend goes to former FIA President Max Mosley who had some fun by convincing a naive journalist, who likes to think he understand the sport, that F1 cars could be fitted with ejector seats. The hack swallowed this story hook, line and sinker, clearly unaware of the operational restrictions of both Formula 1 cars and ejector seats. One idea suggested in the F1 Press Room in Suzuka was that the hack in question should do a test with the system on the circuit, just after the Degner Curve, where the track passes beneath the start of the 130R Corner – or in the tunnel at Monaco.

There was more going on, but the remainder of the good stuff is reserved for my Joe Saward Business of Motorsport weekly newsletter, for which you can sign up if you really want to know the ins and outs of the F1 Paddock. Check it out here.

/ Monaco as usual and then a very odd double-header involving Canada and Azerbaijan/

I might imagine some even worse ideas… however, just for sake of some reasonability, wouldn’t it be wiser to collide LeMans with Canadian GP, which always starts at time when LeMans competitors would be already through?

Great notebook there Joe, about only thing id say is Renault might not get that much off RBR as some think, as Horner hinted before there are clause”s in that engine contract that many are not privy to..the moment that Renault sign that deal for lotus we may well find out.

Hm, Tommy, I think that if Joe mentions the number in writing, like he has done above, its a pretty sure bet that he has solid sources for it.

Christian Horner hinting that cancelling wouldn’t be all that expensive fits, but if you believe pre-emptively cancelling a standing deal in the expectation that your partner MIGHT not heed his side of the deal in the future, it would be as foolish to expect not to have to pay for early cancellation as it is to then expect to find a new partner offering a good deal!

Any thoughts on Mercedes seemingly being all but blacked out of the TV coverage this weekend?

The timing seems odd to me, the ‘no’ decision was delivered to Red Bull weeks ago, coverage (presumably by the same team) from Singapore was perfectly normal, but this weekend they’d clearly angered Bernie in some way.

Typical F1/Bernie decision really – the TV viewers (bringing in huge sums of money – and eyeballs to the advertisers) suffer over some behind the scenes squabble …

“Mercedes seemingly being all but blacked out of the TV coverage this weekend”

Unfortunately such blatant bullying, while rather amusing for the back-story, really puts me off F1. I expect *fair* coverage and not to see some personal vendetta played out when I watch the racing. It’s happened before but this time affected the coverage of the first and second places!

Sod the racing that allegedly takes place, the farcical soap opera that calls itself F1 is top comedy.

On the ejector seat topic, like many I was completely unsurprised to see whose byline was on the article…
🙂

I’m not so sure that and Audi WEC pull out is needed just because Porsche is there. The Porsche is pushing a petrol hybrid, whereas the Audi is pushing VAG’s advanced diesel technology…oh, hang on, you may well have a point there…

Hi Joe,
Brilliant article, as usual.
Isn’t there a small mistake regarding the Ferrari engines deal for Red Bull?
$40 million per year for each team for 3 years, is $240 million instead of $2.4 billion, no?

Sure, but as I expect you know the multiple would apply to an annual revenue stream rather than a bundled 3 year contract. And usually applied to earnings or EBITDA, not revenues. There should also be a discount applied if analysts believe the earnings stream would only last 3 years.

I agree it would be a big addition to a valuation – but more like $1bn if you’re fairly generous rather than $2.4bn.

Henry – Not to get all wonky but you’re quite right. The multiple will applied to annual financials, not to contractual bookings. It is quite feasible that an IPO will use a revenue multiple (plenty of software company IPOs burn money), however, it’s exceptionally unlikely that they’ll get a double digit multiple. More likely a double digit EBITDA multiple (Ford trades at around 12x LTM).

The Mosley story is brilliant. Red Bull, it would appear have been very silly. However it does seem that Germans are only really happy when working with Germans. The level of motivation with Renault has likely gone through the roof with the thought of rubbing Red Bull’s nose in it. I maybe wrong but McLaren need to get Ross Brawn back from fishing and Ron needs to do nothing other than get some sponsors. As already stated, Honda might want to move the compressor too. Nice to see Bernie despite the vampire like habits of CVC still making it all work..the from favourite view of the supporter, an armchair! Excellent article.

Ross Brawn was at the Goodwood Revival a few weeks back – he was interviewed for the ITV coverage and boy did he look relaxed in his tweed jacket and cap! I’m not sure I would put money on him wanting to come back to F1 in any capacity …

Probably but Mc Laren’s current set up is not going to work. Ron managed another PR disaster by only telling JB on the Thursday evening that they did want to keep him on for the second year. The chassis is alright apparently but that is not going to win GP’s. I am sitting in a huge armchair but they need someone like Brawn.

It’s a commonly held view that the chassis is OK but the drivers don’t seem to be so sure. It’s rather pointless if the engine is so down on power as it can’t be tested in a meaningful way. I still find it surprising that everything still hinges around Ron – you’re right, a PR disaster. Almost as bad as Bernie’s set up. It was better when Martin Witmarsh was around.

Well, it was equal to the RBR is straight line speed, it was just slow in every other way… while I have no news about how much wing they had, I can’t help but wonder if blaming the engines is a cover for other shortcomings as well…

Pascal Wehrlein can’t race in F1 next year – he simply doesn’t have enough points for a super license under the new rules which come into effect next year. Winning the DTM would only give him 15 – therefore he will need to spend a year or two in FR3.5 (which wont be Renault from next year) or GP2.

Its the same story for Haryanto as well as he is lying 4th in GP2 which would give him his first points but only 20 of the 40 points required from next season to race. This new system however crude should stop the wilder monied up drivers from GP2 buying their way into F1 seats unless they show some serious talent over the course of a season.

gpcambell,
you’ve missed other updates in the August update to the new-for-2016 rules. 5.1.7 has also changed, such that a driver must either have those 40 championship points, OR a Super Licence in any of three previous 3 seasons (so Wehrlein, Haryanto, Sirotkin, and others can still get in under the old rules), OR had one longer ago and recently shown “outstanding ability in single seaters” (erm, so maybe a Webber comeback in 2017, ha ha) OR be the reigning Formula E champion.

Oddly, because 5.1.5 is what it is (and not, say, part of 5.1.7 option a.), Verstappen still technically ought not to qualify, even if not still by 5.1.1.

It’d be the first test of the new FIA points system, and how willing they are to grant exemptions – surely they wouldn’t stand in the way of a team’s survival, to uphold a knee-jerk scheme?

Not giving one to Wehrlein, would be like not giving one to Schumacher in 1991, simply because he had been driving sportscars and not F3000. Wehrlein likely would have won Euro F3 in 2013, had Mercedes not fast-tracked him into DTM.

Haryanto could be the only driver in the top 8 of GP2 not to have a licence in 2016, and has already held one from YDT testing (2010/12), so I’m not sure how you could say he couldn’t drive in F1 safely (no more so than Chilton or Stevens). Plus, it would open up the Indonesian market to F1.

Ah but will it be a 2015 spec or 2016 spec Ferrar engine at RBR next year Joe? Also if we apply Ron Dennis’s mantra then RBR would have no chance of winning races/the championship next season because they would be a customer team. Do you agree with that? Also I’m quite sure RB can afford to pay a $500m fine considering Red Bull Gmbh’s made over 5 billion euros in terms revenue in 2014.

I doubt we will see VAG in F1 in the short/medium term. You need to be a touch humble to win back customers trust not start in a vanity project like F1. As the F1 hybrid technology is barely mentioned outside of the specialist media, I doubt most members of the public even know what this is, let alone that it is something that would endorse VAG environmentally. They would be best achieveing this by putting their EV cars more front and centre of VW and getting that message across, although to a certain extent the EV car market has been mired in manufacturers claiming EV ranges that have allegedly not been achieved in real world use.

I am sure BE can afford himseelf a wry smile as VAG assumed the morale high ground and would not enter F1 whilst BE was in charge allegedly due to the court cases he was embroiled in. Stones and glasshouses…

As you say bad timing for Red Bull, I think they are snookered and I don’t see Ferrari supplying exact parity of engines, why would they? It might polish up the accounts a bit, try telling that to Vettel if he is following a Red Bull home every weekend.

With regards to your VAG comments, Audi is very active in showing off their Diesel-Hybrid achievement in the WEC/Le Mans. It’s not that difficult to do the same with F1, and even an upside for VAG: there are no diesels in F1. If you want to improve your image (as an advanced technological company), I do think F1 is a good way, why else are Renault and Honda in F1?

Indeed Audi have and it makes perfect sense to showcase this technology in an endurance series. It makes no sense in F1 in a less than 2 hour race and really after VAG taking a hammering on emissions is flying people and kit around the globe to save 30% on fuel in a race a good way of doing this – the green and eco lobby will never let them forget it. That is aside from all the other issues F1 has on promoters going bust, falling interest and TV viewers.

Why are Renault and Honda in F1, I honestly think that some of it is past glory and they want to recreate – Renault don’t even have Hybrid technology in their car range they are EV which is why FE makes perfect sense. It’s notable that none of the other auto makers that you would imagine would be showing interest are not. IMO the engie regs deliver too much downside and not enough upside and I am not seeing the current engine makers using the F1 tech much (or at all) in their road car marketing.

Given Max Verstappen’s recent success after jumping to F1 straight from F3, what are the chances of seeing that year’s F3 champ, Estaban Ocon in a Renault next year? His support from Mercedes may prove a conflict of interest I guess. Also, would not Rio Haryanto have problems obtaining a superlicense (unless he can nab 3rd position in the GP2 championship from Sergey Sirotkin). I have Haryanto down as having only 20 qualifying points based on his performance from the past 3 years if he finishes his current GP2 season in 4th place.

For stay home viewers, the dramatic action of the weekend was slightly off circuit, when three sky presenters ganged up on Ron Dennis and forced him to disclose his driver line up 2016. It was dramatic because RD of all people is not one to be wrong footed into making announcements before planned date.

But three ferocious rabbits managed to corner and attack an ailing bloodhound. Hilarious.

He was fairly relaxed at the BBC interviews, though. Stating that Alonso and Button would drive next year (not with that many words, but in the line of they have contracts and McLaren an option to drop Button, which option they will not use).
But it’s still F1…

I was amazed how long he spoke for. It was the Ron of old, he knew he had to say something after the disastrous showing for Honda after Fernando and Jensons comments. Good stuff to see a decent discussion about the state of play at Macca.

I’m not sure about “forced” Ron said the same, almost word for word, to the BBC in a much less confrontational interview. Seeing that clip, with those three stood there like an embarrassed hanging party, sums up why I’m perfectly happy with the BBC coverage. Mind, I’d be even happier without EJ.

no journalists forced ron into anything he didn’t want to do
strange that this happened at suzuka , don’t you think ?
and he also did the same interview for the BBC , didn’t he , maybe even before the Sky one

Ejector seats are a hilarious idea, just goes to show how little effort some (the majority in my opinion) of journalists put into their job and how seriously they take it. I would hope journalists would at least do some proper research into the story they are writing about but perhaps just a few seconds worth of thought would have been an improvement. Could you imagine an F1 driver going off and heading to the tyre wall, in a car designed by extremely clever engineers to be as safe as possible in a collision, at the last minute deciding, no, I want to eject and fly towards that wall, or perhaps into the crowd at 200mph with just a helmet to protect me!

On the subject of Renault/Lotus I hope they hire JEV, they have Pastor to help pay the bills (although I don’t actually think he’s that bad) so would be great to see the second seat decided on talent alone. I believe he is the best option, a bit of experience, closely matched to the highly rated Ricciardo and he’s French.

Perhaps somebody at Martin-Baker, who make *ejection* seats for aircraft, might deliver a few engineering comments?
—
Whilst walking home from work one evening, I made up a fairly plausible news story about somebody who was in the papers. Anyone who questioned my alleged facts would quickly determine that the story was cobblers, but I persuaded a few mates to spread it around. My “news story” was printed, with zero fact checking, on the front pages of the Independent and Daily Mail. The Times flew a journalist from London to San Francisco for a door step interview.

Sadly the 24 hour news culture has some unfortunate side effects. BBC News, which has been in a pickle many times in recent years, is learning to do the right thing. It’s not enough to be first with the “facts”; the “facts” have to be true.

Unless you have a phenomenal memory, Joe, this report highlighted to me that you are learning paddock news by more than word of mouth; must be some definite writing stuff down (though I suppose you could have a recorder) to get that level of detail.

Well done, and thank you for your efforts.

Also, great hearing about Max Mosley and the ejector seats. Great stuff.

Thanks for the interesting review of recent F1 politics and finance. It’s quite a contrast to the UK press which has mostly been following the Alonso/Button/Dennis story since the GP finished.

I’m hoping that Renault aren’t playing too hard in the Lotus/Enstone purchase. It’s important for Renault executives to show that they aren’t chucking money (other people’s money, after all) down the drain, but the sellers have to believe that they are getting the best possible deal.

I’m hoping too that Renault receive additional funding from CVC. But the necessity for that money suggests that F1 isn’t seen as good a deal for car manufacturers than before the global financial crisis. As an engine manufacturer, Renault has a reasonable claim for more of the F1 money pot. On the other hand, the independent constructors could argue that they don’t have the best engines so they need more money to design a better chassis…

Every time that CVC creates special provisions for a team, they weave a bigger financial problem for the sport. The regulators need to grasp that financial transparency is a sporting matter.

Question, and apologies if you have answered this before. I’m sure the Mano seat didn’t come for free. Who is footing the bill for Alexander Rossi’s 5 races? Really enjoy your notebooks and can’t believe the ejector seat stuff. Wow.

As i understand it the FIA has some sort of agreement with the ACO not to schedule an F1 race the same weekend as LM24, so i’m not convinced that clash could actually happen. Even if it does we could still see Alonso or Button in the Porsche “guest seat” 😉

the interviews christian horner gave this weekend showed red bull have softened their stance on getting parity from ferrari, they seem to have accepted getting a 2nd string engine now. i guess similar to the deal williams get from mercedes rather than the deal sauber get from ferrari.

Some reports suggest that Mateschitz is bored now, and leaving all these negotiations to Horner and Marko. If so, perhaps he should at least make sure that they’re both on the same page. Horner may be talking with a certain amount of resignation, but Marko seems to still be sticking firmly to plan A; i.e. “Give us what we want or we’ll cut off our noses.”.

Melbourne published the 2016 GP on Sunday 3rd April… Any more to info?

Tks

Best regards Martine Walkinshaw Sent from my iPhone > > Please note: This e-mail is confidential and may also be privileged. Please notify us immediately if you are not the intended recipient. You should not copy it, forward it or use it for any purpose or disclose the contents to any person. > Think before you print.

Joe: “However, if the race in Azerbaijan were in the evening, Le Mans TV viewers would be able to slip seamlessly into coverage of the new street race…”

Reading a book about turbine history in bed, as one does, I learned about Cunard turbines providing electricity (not motive power) for ocean liners. Cunard’s turbines could have generated enough electricity to light every house in 1930s Copenhagen, with the radio running full blast.

Singapore somehow pulls night racing off. It takes a lot of leccy to light houses, more leccy to illuminate a race track. And Baku is a much bigger city than Copenhagen in the 1930s.

If I was a Renault ‘bean counter’ I would be questioning what they get from F1. I assume Renault is there to a) improve engineering and b) to sell more cars on the back of their involvement. There is a question mark over a) and I doubt the wider public when weighing up a Clio against a Gold really gives a damn.

Passing thoughts. Infiniti are not Renault in the public eye. Red Bull pulled the plug on Renault back in July (allegedly) and have called off their Renault baiting of late. Might they keep Renaults but badged as Infiniti to save face all round? Hence their change to Ferrari baiting. Or 2015 Ferraris in Torro Rosso and Infiniti in Red Bull. After all. If Renault are buying Lotus then they are showing a commitment to continuing to develop their F1 engine.

I would love for Joe to comment if he enjoyed the race and if yes, then why and how, week after week, maybe one Odd like Singapore, its just too boring to watch…. Like above comment , its more fun reading your article than watching F1 these days

Curiously, no other sites seem to have run the marvellous ejector seat story. Is this because the ‘cut & paste monkeys’ are not so stupid after all, or don’t they even bother to refer to the site in question?

Contrary to all you cynics, I think ejector seats in F1 is a GREAT idea. Here’s another. Cars could be equipped with surface-to-surface paintball missiles which a car following another car could fire at will. Not just Will Stevens, but anytime they felt they might score a hit. Direct hits of the car in front would be rewarded with points. Meanwhile, the car in front would take evasive action by cutting chicances, etc., or more effectively by “early braking” their opponent, slipping behind them and firing missles of their own. Memo to Bernie: Certainly the technologoy exists to accurately record these paintball hits? This could turn F1 into the most exciting “sport” since…since…the International Wet Teeshirt Competition, which I believe will be held in Russia this year?